Oct. 10 (Bloomberg) -- Claims for U.S. jobless benefits
jumped last week to the highest level in six months, providing
the first statistical warning that the damage from the partial
federal shutdown is starting to ripple through the economy.

While half the increase came from California as the state
worked through a backlog following a switch in computer systems,
another 15,000 reflected the furlough of non-federal workers
from employers losing government business, a Labor Department
spokesman said as the data was released to the press.
Applications for unemployment insurance benefits surged by
66,000 in the week ended Oct. 5 to 374,000, the most since late
March, figures from the Labor Department showed today in
Washington.

“The economic costs of a shutdown are going to increase
the longer the shutdown occurs,” said Ryan Sweet, a senior
economist at Moody’s Analytics Inc. in West Chester,
Pennsylvania and the second-best claims forecaster over the past
two years, according to data compiled by Bloomberg. “If this
drags along for the next couple of weeks, the economic toll will
be even more significant.”

Shares surged today amid signs lawmakers were moving to
reach agreement on increasing the nation’s debt ceiling to avoid
a government default. Absent a deal, the possibility that
federal agencies will need to slash spending once the borrowing
limit is reached probably means hiring plans will be put on hold
as business leaders prepare for an economic slump.

Shares Jump

The Standard & Poor’s 500 Index jumped 2.2 percent to
1,692.56 at close in New York, the biggest rally since January.
The Obama administration endorsed a short-term in to the debt
limit that would have no policy conditions attached, signaling
support for a House Republican plan.

Other news today showed the world’s third-biggest economy
was strengthening. Machinery orders in Japan jumped in August to
the highest level since 2008.

A partial U.S. federal government shutdown lasting through
the end of the week could cost the economy 0.2 percentage point
in growth, according to the median estimate in a Bloomberg
survey of economists issued today. The damage escalates to a
0.5-point loss if the shutdown carries through Oct. 25.

Last week’s surge in the number of jobless claims was the
biggest since the aftermath of superstorm Sandy in November. The
median forecast of 47 economists surveyed projected an increase
to 311,000 from the prior week’s 308,000. Estimates ranged from
claims of 304,000 to 340,000.

Diverging Views

Consumers for now aren’t letting the gridlock in Washington
get them down, according to results of the weekly Bloomberg
Consumer Comfort Index. The measure was little changed in the
period ended Oct. 6.

While the government’s partial shutdown and the prospect of
a default made Americans less optimistic about the economy,
measures of personal finances and the buying climate improved,
today’s report showed.

The divergence indicates views on the economy are more
easily swayed by the rancor surrounding the political debate.
Matters closer to home, on the other hand, including a resilient
stock market and improving home values, are helping underpin
sentiment, particularly for high-income consumers.

“Upper-end households, who are thriving in the current
environment, remain confident,” said Joseph Brusuelas, a senior
economist at Bloomberg LP in New York. At the same time, if the
government conflict continues, it “will likely put a dent in
consumer sentiment and business confidence in coming weeks,” he
said.

Data Delayed

While the claims data will continue to be released, the
lapse in appropriations has delayed the Labor Department’s
September employment report and other government data releases.
Payrolls were expected to climb by 180,000 last month, based on
the median forecast in a Bloomberg survey, from 169,000 in
August. Initial jobless claims reflect weekly firings and
typically wane before job growth can accelerate.

Private employers added 166,000 workers in September
following a revised 159,000 rise in August that was smaller than
initially estimated, according to figures released last week by
the ADP Research Institute. The median forecast of 40 economists
surveyed by Bloomberg called for an advance of 180,000.

“Claims are likely to be distorted for some time,” said
Scott Brown, chief economist at Raymond James & Associates Inc.
in St. Petersburg, Florida. “Private firms are stepping back.
Given all the uncertainty, they are unlikely to hire.”

The Labor Department’s claims reports in coming weeks won’t
reflect furloughed federal workers. Those will be tallied in a
separate category and will not influence the headline reading,
though contractors’ dismissals will count.

Federal Contractors

Lockheed Martin Corp., the top federal contractor, had
planned to furlough 3,000 people, though it reduced furloughs by
about 20 percent after the Pentagon said Oct. 5 most civilian
employees sent home in the partial federal shutdown will be put
back to work. Of the Lockheed employees still being furloughed,
only 300 work on military programs.

“The Department of Defense’s decision will not eliminate
the impact of the government shutdown on the company’s employees
and the business,” Lockheed said in its statement.

Business owners may also worry that Congress won’t reach a
timely deal on raising the debt limit before U.S. borrowing
authority lapses around Oct. 17.

The Obama administration, global leaders and economists
have warned that breaching the debt ceiling would have
catastrophic consequences for the economy that would ripple
across the globe.

“The effects of any failure to repay the debt would be
felt right away, leading to potentially major disruptions in
financial markets, both in the U.S. and abroad,” International
Monetary Fund chief economist Olivier Blanchard said during a
press conference this week.